O'Sullivan v Stargate Operations Limited
[2014] NZHC 3193
•12 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1359 [2014] NZHC 3193
BETWEEN ANDY O'SULLIVAN
Plaintiff
AND
STARGATE OPERATIONS LIMITED First Defendant
MATTHEW JAMES BOWDEN Second Defendant
Hearing: 20 November 2014 Appearances:
Mr J D Turner for Respondent/Plaintiff
Mr N J Russell and Ms C R English for Applicants/DefendantsJudgment:
12 December 2014
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
12.12.2014 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
O'SULLIVAN v STARGATE OPERATIONS LIMITED [2014] NZHC 3193 [12 December 2014]
Background
[1] The plaintiff has brought proceedings against the defendants arising out of arrangements pursuant to which for some years he sold on behalf of the first defendant what are colloquially referred to as “party pills”. The plaintiff seeks judgment in the sum of $512,000.
[2] The business was operated by the first defendant. The second defendant is the sole director. It is accepted he was relevantly in charge of the business at the time of these events.
[3] The plaintiff has filed three iterations of the statement of claim. The second amended statement of claim is dated 10 November 2014. The claim appears to be brought against the first defendant based upon an admission of liability which the plaintiff alleges the first defendant admitted on 31 March 2013 that a sum of
$798,037.50 was owing to the plaintiff and that $512,000 of that sum would be credited for the benefit of the plaintiff and paid directly to the Inland Revenue.
[4] He also sues the defendants in tort for breach of a statutory duty, namely the failure, refusal or omission to deduct PAYE or withholding tax and to transfer the sum of $512,129.23 to Inland Revenue or to the plaintiff. The plaintiff alleges that the first defendant was in breach of the Tax Administration Act 1994 and the Income Tax Act 2007 for failing to deduct the correct amount of PAYE and that the second defendant aided the first defendant in such breaches. In regard to this cause of action the sum of $512,129.23 is claimed.
[5] Next there is a claim against both defendants for “money had and received” in the sum of $512,000. It is alleged that the defendants owed the plaintiff $512,000 and that they had “provided no consideration to the plaintiff” for that sum. Instead they retained that amount for their own benefit. The plaintiff also seeks the declaration that the defendants hold that amount on trust.
[6] The plaintiff also sues for misleading and deceptive conduct pursuant to s 9 of the Fair Trading Act 1986. The deceptive conduct was an alleged representation to the plaintiff that the defendants represented that they would deduct and pay the sum of $512,000 while “not knowing nor intending and/or being reckless as to whether the sum of $512,000 would be so paid or not”.
[7] Next there is a claim against the defendants in the tort of deceit which contains allegations that the second defendant represented to the plaintiff that he would arrange, procure, ensure and/or require the first defendant to withhold the sum of $512,000 from the plaintiff and pay it to the Inland Revenue for the benefit of the plaintiff on or about April 2013. There was said to be a relationship of trust and confidence between the parties and a loss having being suffered “due to his reliance” (what he did in reliance is not specified) with judgment being sought again for
$512,000.
[8] There follows a claim against the defendants for breach of the Companies Act 1993 alleging breaches of ss 131, 133, 135, 136, 137, 139, 140 and 141 of the Companies Act. Again there is a claim for $512,000.
[9] The last cause of action also includes an allegation that the second defendant represented to the plaintiff that he would arrange for the first defendant to withhold the sum of $512,000 due to the plaintiff and pay it to the Inland Revenue for his benefit. Again judgment in the sum of $512,000 is sought and a declaration that the defendants hold funds to that amount on a remedial constructive trust imposed on their assets and/or any benefits and advantages obtained as a consequence of their failure to pay the money.
[10] The statement of claim was correctly described by counsel for the defendants,
Mr Russell, as including all but the “family sink”.
[11] The first and second defendants filed an application for stay or dismissal of the proceedings “for want of jurisdiction”. This application was made prior to the second amended statement of claim being filed. The defendants rely on r 5.49 of the High Court Rules. They plead that the plaintiff has already filed proceedings in the
Employment Relations Authority (“ERA”) in respect of the same causes of action and is seeking the same relief. They submit that the amended statement of claim raises matters within the exclusive jurisdiction of the ERA.
[12] In the proceedings which the plaintiff has brought in the ERA, he claims for breach of an individual employment agreement and for wages owing under the Wages Protection Act 1983, annual leave entitlements owing and compensation for unjustified dismissal. The same amount of $512,000 is apparently claimed in those proceedings.
[13] The parties agree that the proceedings for alleged breach of the individual employment agreement were exclusively within the jurisdiction of the ERA pursuant to s 161 of the Employment Relations Act 2000. The defendants, Mr Russell told me, also accept that the tortious claims and the claim under the Fair Trading Act and also for money had and received were able to be filed in the High Court. However it was the position of the defendants that the proceedings in the High Court ought to be stayed pending resolution of the ERA proceeding. The defendants take the view that the underlying problem in the present proceeding relates to the plaintiff’s tax liability and the defendants’ alleged responsibility for it. Therefore, the issue is inextricably tied to the employment relationship which is a matter that remains within the exclusive jurisdiction of the ERA.
[14] The defendants contend there was never any agreement on the part of the second defendant, at the meeting of 31 March 2013 or at any other time, that the sum of $512,000 represented PAYE which the first defendant owed to the Commissioner of Inland Revenue. However, because the plaintiff has asserted that the original employment relationship between the parties was, contrary to the contention of the defendants, one of the employer/employee, then it is a claim which falls clearly within the provisions of s 161 of the Employment Relations Act.
[15] The grounds upon which the plaintiff resists the stay application are that the plaintiff’s causes of action in the High Court are different from those relied on in ERA, the latter consisting of claims arising from an employment agreement. The plaintiff says that the proceedings in the High Court include causes of action against
the first defendant such as a claim for an unpaid advance of $512,000. Against the second defendant the plaintiff raises a claim under the Fair Trading Act and other causes of action which are not within the jurisdiction of ERA. All of the claims in the High Court are able to be litigated in the High Court. They do not fall into the jurisdiction of the ERA and therefore the plaintiff has the right to continue them in the High Court notwithstanding that he has proceedings on foot in the ERA jurisdiction.
Issues
[16] The substance of the dispute that arises between the parties in this application is whether the claims the plaintiff brings are within the exclusive jurisdiction of the ERA and ought to be determined by that body. Significantly, perhaps, the plaintiff has extant proceedings on foot in the ERA which arise from the same history of dealing between the parties, namely the engagement of the plaintiff to sell products which the first defendant was marketing on its behalf.
Relevant legislative provisions and principles
[17] Section 161(1) of the Employment Relations Act states that the ERA has exclusive jurisdiction to make determinations about “employment relationship problems” generally, including in relation to “any other action … arising from or related to the employment relationship”. The section is as follows:
[18] 161 Jurisdiction
(1) The Authority has exclusive jurisdiction to make determinations about employment relationship problems generally, including—
(a) disputes about the interpretation, application, or operation of an employment agreement:
(b) matters related to a breach of an employment agreement:
(c) matters about whether a person is an employee (not being matters arising on an application under section 6(5)):
(ca) facilitating bargaining under sections 50A to 50I:
(cb) fixing the provisions of a collective agreement under section
50J:
(cc) determining whether an employer has complied with section
69AAE:
(d) matters alleged to arise under section 68 because a party to an individual employment agreement has bargained unfairly:
(da) investigating bargaining under section 69O and, if necessary, determining redundancy entitlements under that section:
(e) personal grievances:
(f) matters about whether the good faith obligations imposed by this Act (including those that apply where a union and an employer bargain for a collective agreement) have been complied with in a particular case:
(g) matters about the recovery of wages or other money under section 131:
(h) matters about whether the rules of a union, or of an incorporated society that wishes to register as a union, comply with the provisions of this Act:
(i) matters about whether an incorporated society is entitled to register under this Act as a union or is entitled to continue to be so registered:
(j) matters about whether a person is entitled to be a member of a union:
(k) matters related to a failure by a union to comply with its rules:
(l) any proceedings related to a strike or lockout (other than those founded on tort or seeking an injunction):
(m) actions for the recovery of penalties—
(i) under this Act for a breach of an employment agreement:
(ii) under this Act for a breach of any provision of this Act (being a provision that provides for the penalty to be recovered in the Authority):
(iii) under section 76 of the Holidays Act 2003:
(iv) under section 10 of the Minimum Wage Act 1983: (v) under section 13 of the Wages Protection Act 1983:
(n) compliance orders under section 137:
(o) objections under section 225 to demand notices:
(p) orders for interim reinstatement under section 127:
(q) actions of the type referred to in section 228(1):
(qa) disputes about an invention made by an employee (either alone or jointly with any other person) or any patent granted, or to be granted, in respect of that invention:
(qb) reviews under section 30 of the Patents Act 2013:
(r) any other action (being an action that is not directly within the jurisdiction of the court) arising from or related to the employment relationship or related to the interpretation of this Act (other than an action founded on tort):
(s) determinations under such other powers and functions as are conferred on it by this or any other Act.
(2) Except as provided in subsection (1)(ca), (cb), (d), (da), and (f), the Authority does not have jurisdiction to make a determination about any matter relating to—
(a) bargaining; or
(b) the fixing of new terms and conditions of employment.
(3) Except as provided in this Act, no court has jurisdiction in relation to any matter that, under subsection (1), is within the exclusive jurisdiction of the Authority.
[19] An “employment relationship problem” is defined in s 5 of the Act as including “a personal grievance, a dispute, and any other problem relating to or arising out of an employment relationship”.
[20] Section 161(1)(c) grants the ERA exclusive jurisdiction to deal with matters about whether a person is an employee. It also has exclusive authority to order recovery of unpaid wages under s 161(1)(g). The question in this case of whether the recovery claim should be dealt with in the ERA is preceded by the question of whether what is sought to be recovered is the remuneration derived by an employee.
[21] There is no doubt that there is a dispute between the parties as to the relevant status of the plaintiff. It would appear to be agreed that for some of the time he was an employee but on other occasions he provided services pursuant to a contract for services.
[22] It is not necessary for the Court to enquire into the question of whether the ERA has exclusive jurisdiction to deal with some of the causes of action that are the basis for the High Court claims. It is necessary only to note that there are indisputably proceedings before the ERA that lie within its sole jurisdiction and which it is shortly to hear. Conversely, the High Court proceedings include at least one cause of action, that alleging tortious breach of statutory duties under the Tax Administration Act which lie within the exclusive jurisdiction of the High Court because of s 161(1)(r) of the Employment Relations Act.
[23] It is however necessary for the Court to consider what adjustments, if any, it should make between the two parallel sets of proceedings, the one in this Court and the other in the ERA.
[24] It is not an abuse of process for proceedings to arise out of broadly the same subject matter that are commenced in two individual fora.1 By resort to the principles of issue estoppel the Court can ensure that relevant issues are not litigated twice.2
[25] The Court in Beattie endorsed the appropriateness of the order made in the High Court staying the proceedings in that Court until the Employment Court decision was to hand, with the Judge saying that it would be wrong for the High Court proceeding to go to trial in the absence of that decision.3
[26] In my assessment, the desirability of ordering a stay is not limited to preventing the trial in this jurisdiction from proceeding. A stay can also be ordered for the reason that it would not be conducive to the objectives of the High Court Rules if further interlocutory steps should be taken in this proceeding until the outcome of the ERA proceedings is known. That decision will have a decisive effect on the issues that will remain for determination in the High Court not just with respect to which causes of action will be able to proceed, given the possibility of issue estoppel but also because any remedial relief in the High Court (if any) will be
affected by the extent to which relief was granted to the plaintiff in the ERA. An
1 Beattie v Premier Events Group Ltd [2014] NZCA 184, (2014) 21 PRNZ 826 at [49].
2 At [50].
3 At [30]. See also [56]-[57].
order for stay would go some of the way to ensuring that the parties do not expend time, effort and money on misdirected interlocutory steps in the High Court. Against those advantages, it seems to me that there is unlikely to be any major disadvantage to the plaintiff arising from a stay order. The stay order would be reviewed at the point when the ERA hearing is completed and a decision issued. The ERA has already directed a priority hearing and the case in that tribunal will no doubt be completed expeditiously.
[27] I therefore order that this proceeding is to be stayed until further order of the Court. Either party has leave to apply for variation or discharge of the order having regard to any material change in circumstances which mean that the stay is no longer
justified.
J.P. Doogue
Associate Judge
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